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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday March 9, 2017.
We’ve noted in the previous Market Outlook that: “S&P broke minor support Wednesday, signifies an imminent trend shift.” S&P extended recent losing streak, closed lower Wednesday amid lower oil prices. For the day, the bench mark gauge declined 5.41 points, or 0.23 percent, to end at 2,362.98. The Dow Jones industrial average fell 69.03 points, or 0.33 percent, to close at 20,855.73. The Nasdaq composite rose 3.62 points, or 0.06 percent, to end at 5,837.55. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 3.58 percent to 11.86.
Cavium Inc. (CAVM) was a notable winner Wednesday, jumped 3.38 percent on strong volume to 70.03 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CAVM suggests that the stock could climb above 77 in the coming days. Just so that you know, initially profiled in our January 9, 2017 “Swing Trader Bulletin” CAVM had gained about 15% and remained well position. Below is an update look at a trade in CAVM.
The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red. The yellow bars identify period of neutral or sideways trading pattern. Additionally, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading). Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.
Chart 1.1 – Cavium Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CAVM as a Buy. The overall technical outlook remains Bullish. Last changed March 1, 2017 from neutral.
Over the past few days, CAVM had been basing sideways near the range top as traders digested the January massive rally. Wednesday’s upside breakout had helped clear resistance at the February high, signaled resumption of the summer 2016 upswing. Money Flow measure held firmly above the zero line since the stock reached an interim low in November, indicating there was little selling interest. This is a positive development, supporting further upside follow-through and a test of the 2015 high, just above 77.
Support is around 65. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Short-term technical outlook shifted to neutral. Last changed March 8, 2017 from bullish (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
Over the past few days, S&P has been trending lower in a short-term corrective mode after the late February rally ran out of steam at 2400. Key technical development in Wednesday session was a second close below the late February breakaway gap. This is a bearish development. Technically speaking, when key support breaks, it usually begets more selling. The next downside level to watch is 2350, based on the lower boundary of the pink band. As it was the case of late, all brief pullbacks since the election have been met with aggressive wave of buying interest. So, it will be important to monitor the retreat and rebound behaviors over the next few days to determine whether the pullback is merely a short-term blip or a beginning of a full-blown correction.
Short-term trading range: 2350 to 2400. S&P has minor resistance near 2370, or the late February breakaway gap. Above it, a more significant resistance lies at 2400. For now, 2350 represents key support. A failure to hold above that level signals a short-term correction with short-term downside target of 2300, based on the trend channel moving average.
Long-term trading range: 2300 to 2400. Unless there is a headline that everyone recognizes as extremely positive or negative, expect S&P to swing within the 100 point range, between 2300 and 2400.
In summary, S&P broke key support this week. Market internal has weakened but support is strong in the 2350 area. This could help minimize downside follow-through and widespread breakdowns.
(By：Michelle Mai for Capital Essence)
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